Investor · Roanoke, VA · Member since 2014 · 39 posts · 11 votes
Hello, I successfully leased my old home out when I moved and want to get a head start on tax planning. I purchased the home for about $148k, and Zillow says it is now worth about $160k as of the date the tenants moved in. The local tax assessor says the land is worth about $62k. I'm a bit unclear on how to calculate the basis in this case since I didn't buy the house originally as a rental property. Thanks for any help.
Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
11y
My non tax-pro best guess is what you paid minus the land value. So $148k - $62k / 27.5.
Just curious - do you have a lot of gains you could realize tax-free if you were to sell? Did you occupy for 24 months or more? If so, you may want to sell within 36 months of vacating to lock that in. If you want a tax pro, I may be able to ping one for you as well @Ian Lord. See if he has time to help you out.
Lower of adjusted basis or fair market value. Adjusted basis is generally your original cost plus improvements over the years. Don't forget about the Section 121 exclusion which @Steve Vaughan alluded to.